Should photos of empty lots at southern Delaware real-estate developments, circa 2009, be admitted as evidence of financial fraud? Should correspondence between bank executives and federal regulators be considered?

Those were two evidentiary questions, among numerous others, that U.S. District Court Judge Richard G. Andrews faced on Monday during hearings before the March criminal trial of four former Wilmington Trust executives.

Defense attorneys argued the photos, which are sealed in court, would be "extremely prejudicial" for a jury tasked with determining whether the former executives would go to prison.

"When you have fields of grass for a project that was supposed to be at its completion stage, that's direct evidence that the (loan) waiver practice was a sham," U.S. attorney Jamie M. McCall said on Monday.

Buffalo, New York-based M&T Bank bought Wilmington Trust – a hundred-year-old, du Pont family-founded institution – at a steep discount in 2011, after the Delaware bank revealed that many of its commercial real estate loans were worth significantly less than previously thought.

McCall and his fellow prosecutors say Wilmington Trust executives a decade ago hid from regulators and shareholders the true value of the bank's devaluing commercial loan portfolio by executing a plan to waive, or "mass extend," past-due loans.

Many were for developments in Sussex County, such as the Oaks at Georgetown, where one of the empty lot photos had been taken, according to prosecutors.

"The bank embarked on a plan to mass-extend, through short-term extensions, in excess of $1.3 billion of loans," a federal indictment states.

Former bank President Robert Harra Jr., former Chief Financial Officer David Gibson, former Chief Credit Officer William North and former Controller Kevyn Rakowski face charges of fraud, conspiracy and making false statements to federal regulators. The defendants did not attend the hearing on Monday.

Former Wilmington Trust CEO Ted Cecala was not charged.

Prosecutors originally had indicted the bank itself, in addition to its four executives, making it the only financial institution in the country to have faced criminal charges after receiving federal bailout dollars in 2008.

Yet just minutes before trial was set to commence in October, Andrews announced that prosecutors and the bank had reached a deal – trading felony charges for a $44 million civil penalty, and an agreement to cooperate during the trial against its own former bankers.

The amount, combined with $16 million previously paid to securities regulators, created a $60 million total settlement.

"Regulators are entitled to accurate disclosures. That didn’t happen here," Acting U.S. Attorney for Delaware David Weiss said in October.

Attorneys for the remaining defendants criticized the deal, including David Wilks, who represents North.

He said if one individual at the bank were guilty of a crime, then by law the bank itself also would be guilty.

“We now know that the government doesn’t think that that happened because they dropped the criminal charges against the bank," he told The News Journal in October.

Defense attorneys also argue the bank's practice of giving developers leeway on loan payments was common among its peer institutions and had been a longstanding practice for more than a decade. The practice also was not hidden from shareholders, nor the Federal Reserve, they say.

The attorneys repeated those arguments during the pre-trial hearing on Monday.

Among the evidentiary questions considered was a piece of correspondence between bank executives and federal regulators that defense attorneys say exculpates their clients.

"It shows that defendants believed that they provided everything that was asked for," said Geoffrey Rosamond, a partner at McCarter and English.

Belief of compliance with the law is key in the case, as defendants had to knowingly commit a crime to be found guilty.

Andrews said he needs more time before he rules on the admissibility of the correspondence, as he needs to gather additional information about its relevance.

Regarding the photos showing empty Sussex County lots, Andrews said he was "inclined to exclude the pictures as being irrelevant at the start," noting they could be reintroduced if a dispute arises during trial over the nature of development that occurred at the photographed projects.

Prosecutors and defense attorneys also battled over whether to allow as evidence details about; a financial bookkeeping software, the relevance of an expert witness, and supplemental financing for past-due loans.

Wilmington Trust's use of money, from sources outside of loan revenue, to support the health of real estate developers' debt could indicate bad intent, U.S. prosecutor Robert F. Kravetz said at the hearing.

The "supplemental financing," he said, "has the ability to mask bad loans."

Contact Karl Baker at kbaker@delawareonline.com or (302) 324-2329. Follow him on Twitter @kbaker6.